Why I Still Haven't Bought a Smartphone

11 Apr 2013

In Capitalist America, you vote with your money. When you purchase a smartphone, when you accept that 2-year contract, and when you pay those phone bills without a blink of an eye… You're directly saying to the company: this is A-OK; keep doing what you're doing.

I, on the other hand, am not A-OK with what they're charging. How can a phone cost the same as a mid-range gaming laptop?

Numerous websites have done studies on the bill of materials of an iPhone, for example. I understand Apple tends to charge a premium for their devices, but the contract price is no different than the next high-end smartphone on the market. The 32GB iPhone 5 costs $217 after materials and manufacturing. Even if you add a another $50 per device for R&D (which is most likely generous), it still doesn't add up; it retails for $749. That gives them a gross profit margin of 64.35%. Non-phone manufactures like ASUS have a gross profit margin of around 25%-35% — much more reasonable!

Now, all that being said, here's the thing: The high upfront cost is only the beginning. There is no competition between carriers. Have you ever tried to price match to try to save a little bit of money? Turns out, you can't. Every plan is different in some minute, yet important, detail so that you can't compare any of them equally. Even if you try, you'll never find the right plan for you. There's always going to be too many minutes, too many texts, and never enough data.

If you're lucky to find a smaller company that's monthly prices aren't atrocious, you'll be stuck with older phones that can be had for $80 on eBay, yet they charge full retail for them. You can't even bring your own phone.

I like what T-Mobile is doing, but it's not enough. They've gotten rid of contracts, now they still need to get rid of paying for what you don't use. This will indeed destroy your unlimited data plan, but it's only fair. If I use 1GB, and you use 10GB — yet we both get charged the same amount… what does that remind you of? Socialism!

There are no loopholes. There are no sales. If you think it's a good deal it's not. Pull out a spreadsheet, see for yourself! I have.

Note: In my particular spreadsheet I'm latching onto a family plan, so I only have to purchase the extra data plan. Even then, that's 4.1% of my yearly income. Don't forget state sales taxes on phone plans are high - IL being one of the worst.